Pending Home Sales on a Roll, Up for Sixth Straight Month

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2% to 97.6 from a reading of 94.6 in June, and is 12.0% higher than July 2008 when it was 87.1.The index is at the highest level since June 2007 when it was 100.7.
Source: RISMedia, Inc. 9/09

Seniors Increasingly Realizing Nest Egg in Life Insurance Policies

Unlike younger investors, older adults may not have the time to wait for the market to recover all of their losses, so they’re turning to this previously overlooked asset to see whether they should sell it and use the money to pay medical bills or other expenses.

Seniors sold life insurance policies with a face value of $11.8 billion last year, almost double the value of policies sold just two years earlier, according to the U.S. Senate’s special committee on aging, which recently held a hearing on such transactions. A “life settlement,” as a sale is called, may be an attractive option for seniors who determine they no longer need their life insurance policy, said Doug Head, executive director of the Life Insurance Settlement Association, an industry group.
Policyholders typically sell their insurance through life settlement brokers to investment companies for lump sums that are usually several times greater than they would receive if they surrendered the policies to the insurance companies, he said. The new owners pay the remaining premiums on the policies and become the beneficiaries when the original policyholders die.
But a life settlement doesn’t always make sense, insurance experts caution, and seniors considering such a sale should consult with an independent financial adviser to figure out whether it’s the best move for their particular circumstances.
“ If you’re thinking about selling your life insurance mostly because you’re strapped for cash, there may be other ways to tap the value of your policy without losing your coverage,” said Houston lawyer and insurance expert David McDowell. “You may be able to take out a loan against your policy or receive a partial payout through an accelerated death benefit,” he said. “It’s worth visiting with your life insurance agent and exploring the options before sacrificing your coverage.”
Source: RISMedia, Inc. 9/09

President Obama Announces Homeowner Affordability and Stability Plan

On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan designed to help 7 to 9 million families avoid foreclosure by refinancing or modifying their mortgages. The plan also strengthens the federal commitment to Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs).

Here are the key elements of the Obama plan:

1. Refinancing by the GSEs of loans that they own or guarantee. The GSEs will work with their loan servicers to develop a streamlined refinancing program for borrowers with loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent who now face difficulty refinancing.

2. A $75 billion Homeowner Stability Initiative--with lender, servicer, investor, and borrower incentives to make it work. The program is limited to loans at or below the GSE conforming loan limits.

3. More support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth. The plan also raises the cap on mortgages that the GSEs may hold in their portfolios by $50 billion to $900 billion.
Source: NAR 2/09

Fannie Raises Limit on Investor and Second Home Borrowers from 4 to 10 Financed Properties
At the urging of NAR, Fannie Mae announced a new policy on February 6, 2009, to allow investors and second home buyers to own up to 10 financed properties. The new policy takes effect on March 1, 2009, and replaces the current 4-property limit. The restriction applies to the total number of financed properties, not just to the number sold to Fannie Mae.

Investor and second home borrowers that seek to own between 5 and 10 financed properties must meet additional eligibility requirements. Borrowers must have a credit score of at least 720. The maximum loan-to-value ratio is 70% or 75%, depending on specified criteria. Borrowers may not have any history of bankruptcy or foreclosure in the past 7 years, or any mortgage delinquencies of 30 days or greater within the past 12 months. Reserve and other requirements also apply.
Source: NAR 2/09

Senate Modifies Homebuyer Tax Credit
During debate on the stimulus bill, Senator Johnny Isakson (R-GA) offered an amendment that significantly expands the homebuyer tax credit. The credit would be $15,000 and would be available to all purchasers of a principal residence, not just first-time homebuyers. The legislation is still in flux and must be reconciled in a House-Senate conference. The chart attached compares current law with the House and Senate versions of the bill.
Source NAR 2/09

House Committee Passes Reforms to Foreclosure Assistance Program
The House Financial Services Committee last week approved H.R. 787, a bill which reforms the Hope for Homeowners program. Hope for Homeowners was designed to help families who are facing foreclosure refinance into a safe, affordable FHA mortgage. However, the restrictions on the program have been such that lenders are refusing to participate, and since October of 2008 only 25 mortgages have closed under the program. HR 787 eases some restrictions to make lender participation more likely. The bill allows for payments to loan servicers and lessens the write-down for lenders, while preserving the benefits to homeowners and limiting risks to the FHA fund and the American taxpayer. In addition, the Committee approved another bill, HR 788, to provide a safe harbor for mortgage servicers who engage in certain loan modifications. This bill should also help ease the way for more loan modifications for families in trouble. Both bills are expected on the Floor of the House this week.
Source NAR 2/09

Freddie Mac Kicks Off Pilot to Help High Risk Borrowers Avoid Foreclosure
On February 3, 2009, Freddie Mac announced its new "Workout Strategy for High Risk Loans" to keep more families in their homes. The pilot uses servicers, including Ocwen Financial Corporation, that specialize in dealing with Alt A and other higher risk mortgage loans.

Under the pilot, borrowers who are at least 60 days delinquent will receive intensive servicer attention to achieve a successful work-out. The pilot will help 5,000 loans from California, Nevada, and other high delinquency rate states. Freddie may expand the pilot after reviewing the results due in June 2009.
Source: NAR 2/09

Homeowners Urged - Sell Short, Refinance, But Try Not to Lose Your Home
By Jerry W. Jackson

RISMEDIA, January 16, 2009-(MCT)-Every day, more people slip into the foreclosure whirlpool and spiral downward toward the day they may have to leave their home. What should you do if you are on the verge of getting a foreclosure notice?

First and foremost, industry specialists say, you should resist the natural human tendency to freeze up. Face the issue head on and prepare for days and weeks of making phone calls and corresponding with people who may be able to help.

“ Don’t assume it’s too late to act,” said Ralph Roberts, a consumer advocate in Michigan and co-author of Foreclosure Self-Defense for Dummies. “As long as you are residing in the home, you probably have some opportunity to keep your home.”

Roberts, a Realtor who lost his home to foreclosure back in the 1970s, said people facing foreclosure have more avenues to pursue than they might realize-certainly more than the typical “pay up or move out” that many people think is their only choice.

Potential solutions include:
- Negotiating a modification of the loan.
- Refinancing the loan.
- Listing the home through an agent for a possible “short sale.”
- Selling the home to an investor on your own.
- Declaring bankruptcy.

Short sales-in which the lender agrees to take less than is owed on the home, writing off some or all of the loss to avoid the expense of a foreclosure-typically are handled by real estate agents, which at least takes some of the pressure off of a harried homeowner. Many professional real estate agents are working more short sales these days and have buyers lined up looking for bargains, though the process can be slow and frustrating.

“ The banks are just not moving fast enough. They are sitting on these, and it’s outrageous. Something’s got to be done about that” at the national level, said Ernst Urbainczyk, a veteran agent with Keller Williams Heritage Realty in Lake Mary, Fla. Lenders may also reject short-sale offers, sometimes leaving the seller with little or no time to prevent the foreclosure.

Matthew Englett of Kaufman Englett & Lynd, an Altamonte Springs, Fla., law firm that specializes in foreclosure defense, real estate litigation and bankruptcy, said there are usually several different defenses a borrower can take to dispute a foreclosure, including “wrongful or misleading conduct on behalf of the lender or its agents.”

As the case moves forward, the law firm negotiates with the lender to try to get it to modify the mortgage with a lower interest rate and loan amount.

“ In many cases, that would mean the principal would have to be reduced,” Englett said. The law firm charges a flat fee ranging from $1,750 to $2,500 for its foreclosure-defense cases.

Source: © 2009, The Orlando Sentinel (Fla.).
Distributed by McClatchy-Tribune Information Services.
Rimedia January 2009

Low Rates Likely to Stay Awhile, But Cash-outs Refis Elusive
By Alan J. Heavens
RISMEDIA, January 16, 2009-(MCT)-To get us through the early part of this new year, let’s get some perspective on what could be driving real estate matters in the weeks to come.

First off, it looks as if low fixed interest rates for mortgages-now around 5%-will be with us awhile. But Philadelphia mortgage broker Fred Glick warns that rates could begin to rise if the stock market recovers.

What he means is that investors who have flocked to the relative safety of Treasury bonds will shift their money to Wall Street if it seems profitable.

“ If they are buying stocks”-the Street is always ahead of what happens-”the market has guessed that the economy is recovering,” Glick said. “When economies recover, rates eventually go up to stop growth and fight inflation.”

I see the point. Treasury bonds today offer little or no return to investors, who would at least get a somewhat thicker mattress if they put their money there. As we’ve seen, investors are really nervous people, and the slightest bit of good or bad news sends them into buying or selling frenzies and the rest of us to the unemployment office.

Which brings us to the less-than-frenzied state of home-buying. Not much of a mood to purchase right now. Refinancing, anyone?
I asked Holden Lewis, columnist for Bankrate.com, who has the best chance to refinance today. His response:
A homeowner who owes no more than 80% of the house’s appraised value; has excellent credit overall and has never been 30 days late on the mortgage in the last two or three years; is an employee who can readily document wages; needs a loan for $417,000 or less; and is refinancing for a better rate, not a cash-out.

Cash-out refis are what got a lot of people into mortgage delinquency and foreclosure. They pulled out wads of equity, then, as circumstances changed, ended up owing up much more than their houses were worth.

“ Either they made small down payments, or got negative-amortization loans, or the property’s value fell, or a combination of two or all three of those things,” Lewis said. “People with little equity must get mortgage insurance, and the resulting payments could lower or eliminate the incentive to refi.”

Lewis said lenders aren’t keen on cash-out refis now, except when the borrower is taking out a few thousand dollars to pay the closing costs.

Back to buying and selling: Readers continue to tell me that a lot of sellers still think they can demand high prices for as-is properties. Sellers complain that buyers are too picky.

But if your place isn’t ready for the market, prospective buyers will move on. If you must put your house on the market now, it makes sense to have it checked by a qualified home inspector first.

During the housing boom, pre-inspections seemed unnecessary. If a buyer balked at a new roof or furnace, another would be along soon.
Not anymore. To sell a house quickly and for a satisfactory price, a seller must make sure the house is close to perfect. If that means spending money to make money, spend it.

Alan J. Heavens is the real estate columnist for The Philadelphia Inquirer.
Source:© 2009, The Philadelphia Inquirer.
Distributed by McClatchy-Tribune Information Services.
Rismedia, January 2009